Concerns re. Proposed Condo Act Amendments – Concern #1

As mentioned in previous posts, Bill 106: Protecting Condominium Owners Act was introduced in the Ontario Legislature on May 27, and the full text of the bill is now available here. If passed, this bill will make crucial changes to the administration and operation of condominiums, which will affect both condo corporations and owners across Ontario.

Many of the proposed amendments to the Condominium Act, 1998 (“the Act”) look very good to me. However, I do have some concerns, which I will be blogging about in the coming weeks. This is my blog post on Concern #1.

Concern #1 – Responsibility for the Deductible on the Corporation’s Insurance Policy

Currently, Section 105 of the Act outlines the following:

• In the case of insured damage (i.e. damage of a sort covered by the corporation’s insurance), the corporation is responsible for the deductible except in cases where an owner or occupant negligently causes damage to his or her own unit.
• However, the corporation can pass a by-law to extend the owner’s responsibilities in relation to the corporation’s deductible.

Many condominium corporations have passed such “insurance deductibles by-laws”. The terms of such by-laws may vary from condominium to condominium, but in most cases the by-law says that owners are responsible for the deductible on the corporation’s policy in the following circumstances:

1. Where the owner, or an occupant of the owner's unit, or a guest or agent of the owner, negligently causes damage to any part of the property.
2. In the case of insured damage to the owner's unit.

Many condominium corporations (and their owners) feel that such by-laws make very good sense, for a number of reasons:

• Without such a by-law, condominium owners are essentially forced, in most circumstances, to “self-insure” (through their common expenses) for the relatively large deductibles on corporation policies.
• In most cases, the owner’s insurance will include coverage for losses falling within the corporation’s deductible. Therefore, owners are often already paying for this coverage. Without a by-law, the owners end up paying twice for losses falling within the corporation’s deductible – because the ownership as a whole will cover the cost through common expenses (rather than taking advantage of the existing coverage under unit policies).
• Such by-laws also render the owners responsible for the deductible in the case of damage negligently caused to any part of the property – not just to the owner’s unit (which is a current weakness in Section 105).
• Another important consideration is as follows: If owners have increased responsibility for the corporation’s deductible, then this may reduce insurance claims, because owners may do more to avoid or to minimize insured events.

The proposed amendments to the Act include the following proposed changes to Section 105:

1. An owner would be responsible for losses falling within the corporation’s deductible where the owner or an occupant of the owner's unit negligently causes damage to any part of the property. This, I think, makes good sense. It partially resolves the current weakness in Section 105. However, I think that owners should also be responsible for the deductible in the case of damage negligently caused by a guest or agent of the owner.
2. The obligations of owners (in relation to the corporataion’s deductible) could be changed by a provision in the declaration. A proposed amendment to Section 107 of the Act would also say that any amendment to the declaration – to add such a provision – would require consents from the owners of 90% of the units.

This would appear to eliminate all existing and future insurance deductibles by-laws. I don’t understand why this is being proposed. Such by-laws are passed with the support of the owners of a majority of all units. I don’t see any good reason for insisting that these reasonable provisions respecting responsibility for insurance deductibles be contained in the declaration.